Brazil's Central Bank Continues Rate Cuts Amid Political Uncertainty

BRASÍLIA -- Brazil's central bank continued its cycle of rate cuts Wednesday as a political crisis threatens to cripple a budding economic recovery.

The bank cut its benchmark Selic rate to 10.25% from 11.25%, continuing a reduction in borrowing costs started in October. The move was spurred by Brazil's struggling economy and below-target inflation, according to the central bank's statement announcing the cut.

Continue Reading Below

The bank said in its statement announcing the cut that the trend for inflation remains favorable, and that recent indicators point to a gradual economic recovery this year. Uncertainty regarding the progress of economic overhauls proposed by President Michel Temer nevertheless could hurt growth, the statement said.

"It is necessary to monitor possible impacts of higher uncertainty on the prospective path of inflation," the bank said.

(MORE TO COME)

Write to Paulo Trevisani at paulo.trevisani@wsj.com and Jeffrey T. Lewis at jeffrey.lewis@wsj.com